Quant Points Out Curious Relationship Between USDT Inflows & Bitcoin Price

Keshav Verma

1 year ago

3 mins read

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A quant has explained using on-chain data that an interesting relationship may exist between the USDT exchange inflows and Bitcoin price.

USDT Derivative Exchange Inflows May Be Influencing Bitcoin Price

As pointed out by an analyst in a CryptoQuant post, many stablecoins entering into derivative exchanges have recently preceded a rise in the BTC price. The relevant indicator here is the “Tether derivative exchange inflow means,” which measures the mean amount of USDT currently being transferred into the wallets of all derivative exchanges.

This metric is different from the normal exchange inflow, since that one measures the total amount of the stablecoin flowing into exchanges rather than the average amount flowing into these platforms per transaction.

The benefit of this indicator over the normal exchange inflow is that a few whales can skew the latter metric as they generally transfer large amounts. At the same time, the former provides a better picture of the average investor’s behavior in the market.

When the inflow mean value is high, a large amount of USDT is flowing into exchanges with each transaction right now. On the other hand, low values imply the average holder isn’t depositing too many coins to these platforms.

Now, here is a chart that shows the trend in the 7-day moving average (MA) Tether exchange inflow means, as well as that in the Bitcoin price, over the last couple of weeks:

The possible relationship between the price of Bitcoin and USDT derivative exchange inflow mean | Source: CryptoQuant

As you can see in the above graph, the quant has marked the various points of interest in the USDT derivative exchange inflow mean and also how the Bitcoin price reacted to these instances.

It seems like whenever this metric has spiked to relatively high levels recently, the cryptocurrency’s price has first observed a small downtrend and followed up with some rise.

Generally, investors deposit stablecoins like Tether to exchanges when they want to swap them out for a volatile cryptocurrency like Bitcoin, thus providing buying pressure on the price of the coin they are shifting into.

However, as the inflow mean indicator used here is strictly for derivative exchanges, the likely purpose behind these deposits wasn’t to purchase other assets with them (as spot exchanges are usually used for this reason).

The quant thinks that these recent Tether exchange inflows were possibly being made to open long positions for Bitcoin, hence the bullish effect on the asset.

“Since this is not a rule, it cannot be accepted as 100% accurate, and we may not always see the price movement I mentioned,” the analyst cautions. “I have presented you with a statistic to be careful about when opening your trades.”

BTC Price

At the time of writing, Bitcoin is trading around $28,000, up 14% in the last week.

Looks like the value of the asset has declined in the last few hours | Source: BTCUSD on TradingView

Featured image from Maxim Hopman on Unsplash.com, charts from TradingView.com, CryptoQuant.com

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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